Professional Documents
Culture Documents
8e
By Charles W.L. Hill
What Is Accounting?
Accounting is the language of business it is the way firms communicate their financial positions Accounting is more complex for international firms because of differences in accounting standards from country to country
differences make it difficult for investors, creditors, and governments to evaluate firms
The International Accounting Standards Board (IASB) has made some attempts to establish common accounting and auditing standards across countries
19-3
19-4
The differences make it challenging to compare financial performance of firms from different countries While there have been efforts to harmonize accounting practices across countries, significant differences remain
19-5
19-6
19-7
A countrys accounting system reflects the relative importance of each constituency as a provider of capital
accounting systems in the U.S. and Great Britain are oriented toward individual investors Switzerland, Germany, and Japan focus on providing information to banks France and Sweden prepare financial documents with the government in mind
19-8
19-10
Many developing nations have accounting systems that were inherited from former colonial powers
lack of trained accountants
19-11
19-12
It is difficult to compare financial reports from country to country because of national differences in accounting and auditing standards
19-13
The International Accounting Standards Board (IASB) is a major proponent of standardization of accounting standards
common accounting standards will facilitate the development of global capital markets most IASB standards are consistent with standards already in place in the United States
19-14
By 2010, there could be only two major accounting bodies with substantial influence on global reporting FASB in the United States and IASB elsewhere
19-15
Transactions among members of a corporate family are not included in consolidated financial statements
they are recorded in separate statements
The IASB requires firms to prepare consolidated financial statements, as do most industrialized nations
19-16
19-19
Donald Lessard and Peter Lorange - firms can deal with the problems of exchange rates and control in three ways 1. The initial rate - the spot exchange rate when the budget is adopted 2. The projected rate - the spot exchange rate forecast for the end of the budget picture 3. The ending rate - the spot exchange rate when the budget and performance are being compared
19-22
19-23
19-24
19-25
Review Question
_______ has an accounting system that was developed with the government in mind.
Review Question
Which organization is responsible for formulating international accounting standards? a) b) c) d) the Global Federation of Accountants the World Bank the International Accounting Standards Board the International Panel of Accounting Standards and Ethics
19-27
Review Question
By 2010, which two accounting bodies are expected to dominate accounting practices? a) The historic cost principle and FSAB b) FSAB and the IASB c) The IASB and the historic cost principle d) The current rate method and the historic cost principle
19-28
Review Question
When a firm uses the exchange rate at the balance sheet date to translate financial statements of a foreign subsidiary into the home currency, the firm is using a) the temporal method b) the current rate method c) FASB 52 d) the historic cost principle
19-29
Review Question
Financial statements of U.S. firms must be prepared according to